Incumbency and entry in license auctions: The Anglo-Dutch auction meets another simple alternative

Helmuts Azacis () and Roberto Burguet

International Journal of Industrial Organization, 2008, vol. 26, issue 3, pages 730-745

Abstract: The existence of ex-ante strong incumbents may constitute a barrier to entry in auctions for goods such as licenses. Favoring the allocation to entrants is a way to induce entry and thus create competition. Designs such as the Anglo-Dutch auction have been proposed with this goal in mind. We first show that the Anglo-Dutch auction does indeed foster entry and increases the revenues of the seller. However, we argue that a more effective way could be to stage the allocation of the good so that each stage reveals information about the participants. We show that a sequence of English auctions, with high reserve prices in early rounds, fulfils this property and is more efficient than any one-stage entry auction. Moreover, it also outperforms the Anglo-Dutch auction in terms of seller's revenues.

Date: 2008

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Persistent link: http://EconPapers.repec.org/RePEc:eee:indorg:v:26:y:2008:i:3:p:730-745

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